Analyst downgrades Tesla and says orders for its home battery are 'misleading'

Attendees
with the new Tesla Energy Powerwall Home Battery during an event
at Tesla Motors in Hawthorne, California, on April
30.REUTERS/Patrick T.
Fallon

UBS says the numbers on Tesla's home batteries are "misleading."

In a note Tuesday, UBS analyst Colin Langan downgraded Tesla to
"Sell" from "Neutral" and cut the firm's 12-month price target to
$210 from $220.

In May,
Bloomberg estimated that Tesla took orders worth about $800
million on its energy-backup units.

Langan wrote that this number was overstated (emphasis added):

TSLA received over $800m in "orders" (~3 [gigawatt hours], ~0.75
[gigawatts]) in the first 5 days of announcing the
powerwall/Powerpack; however, this pace is misleading as
customers did not put down deposits, so these are just
solicitations of interest. More importantly, early
adopters ("green" consumers) likely are driving up initial
orders, but once these orders are filled, making the mass market
leap will likely be difficult given the challenging economics.

Because orders don't necessarily translate into final sales,
Langan said Tesla's planned storage capacity of 15 gigawatts by
2020 may end up being higher than demand.

Langan noted that Tesla's stock had surged 40% since investors
anticipated the announcement of the home batteries. He estimates
market demand of 3.2GW by 2020, less than the consensus of 7.2GW.
If the broader estimate is correct, Tesla would need 75% of
market share, Langan said.

And meanwhile, there's still plenty of room for new competitors
to eat into Tesla's market share.

Langan also expects that Tesla's spending on research and
development for the new Model
3 and stationary storage will continue to grow, and he
lowered estimates for 2015 earnings per share to $0.20 from
$1.00.

Tesla shares fell as much as 4% in premarket trading. Shares are
up 27% year-to-date and 28% over the past 12 months.